8-K
REGIS CORP (RGS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 2020
REGIS CORPORATION
(Exact name of registrant as specified in its charter)
| Minnesota | 1-12725 | 41-0749934 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No) |
7201 Metro Boulevard
Minneapolis, MN 55439
(Address of principal executive offices and zip code)
(952) 947-7777
(Registrant’s telephone number, including area code)
(Not applicable)
(Former name or former address, if changed from last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.05 per share | RGS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Regis Corporation
Current Report on Form 8-K
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On February 3, 2020, Regis Corporation announced the financial results for its fiscal quarter ended December 31, 2019. A copy of the News Release issued by Regis Corporation in connection with this Item 2.02 is attached as Exhibit No. 99 and incorporated by reference herein.
The information in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
| EXHIBIT<br><br>NUMBER | |
|---|---|
| 99 | Regis Corporation News Release dated December 31, 2019. |
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| REGIS CORPORATION | ||
|---|---|---|
| Dated: February 3, 2020 | By: | /s/ Amanda P. Rusin |
| Name: Amanda P. Rusin, Title: Secretary |
Exhibit
| Exhibit No. 99 |
|---|
REGIS REPORTS SECOND QUARTER 2020 OPERATING RESULTS AND ESTIMATES THAT ITS TRANSITION TO A FRANCHISE PLATFORM WILL BE SUBSTANTIALLY COMPLETE BY CALENDAR YEAR-END; COMPANY BEGINS MEANINGFUL G&A REDUCTIONS
The Company Continues To Make Significant Progress In Its Transition To A Fully-Franchised Model With The Sale And Conversion Of An Additional 443 Company-Owned Salons To Its Asset-Light Franchise Portfolio During The Quarter; Year-To-Date, The Company Has Sold And Converted 988 Company-Owned Salons To Its Franchise Portfolio
Approximately 900 Company-Owned Salons, Or Approximately 50% Of The Remaining Company-Owned Salon Portfolio Available For Sale Are Now In Various Stages Of Negotiations To Be Purchased After Adjusting For Expected Salon Closures
Significant Progress In Transition Enables The Company's Retention Of Guggenheim Securities, LLC, The Investment Banking And Capital Markets Business Of Guggenheim Partners, LLC, As Its Exclusive Investment Banker To Identify Sources Of Replacement Debt Financing On Terms Appropriate For A Fully-Franchised Capital-Light Growth Platform
The Company's Board Of Directors Elects Hugh Sawyer, President and Chief Executive Officer, As Chairman Of The Company's Board Of Directors
Dave Williams To Remain The Board's Lead Independent Director
| Three Months Ended December 31, | Six Months Ended December 31, | |||
|---|---|---|---|---|
| (Dollars in thousands) | 2019 | 2018 | 2019 | 2018 |
| Consolidated Revenue | 208,765 | 274,671 | 455,803 | 562,506 |
| System-wide Revenue (1) | 428,731 | 451,045 | 878,019 | 916,257 |
| System-wide Same-Store Sales Comps (2) | (2.3 | 0.9 | (1.7 | 0.8 |
| Franchise Same-Store Sales Comps (2) | (1.4 | 1.4 | (0.8 | 1.3 |
| Company-owned Same-Store Sales Comps | (3.6 | 0.5 | (2.7 | 0.5 |
| Net (Loss) Income From Continuing Operations | (9,481) | 417 | (23,659) | (46) |
| Diluted (Loss) Income per Share From Continuing Operations | (0.26) | 0.01 | (0.66) | 0.00 |
| EBITDA (3) | (986) | 16,956 | (6,828) | 26,723 |
| as a percent of revenue | (0.5 | 6.2 | (1.5 | 4.8 |
| As Adjusted (3) | ||||
| Net Income, as Adjusted | 4,622 | 8,039 | 18,522 | 19,356 |
| Diluted Income per Share, as Adjusted | 0.13 | 0.18 | 0.50 | 0.43 |
| EBITDA, as Adjusted (3) | 17,014 | 20,615 | 46,799 | 45,749 |
| as a percent of revenue | 8.1 | 7.5 | 10.3 | 8.1 |
All values are in US Dollars.
____________________________________
(1) Represents total sales within the system, excluding TBG.
(2) System-wide and franchise same-store sales excludes TBG in both periods.
(3) See GAAP to non-GAAP reconciliations, within the attached section titled "Non-GAAP Reconciliations".
MINNEAPOLIS, February 3, 2020 -- Regis Corporation (NYSE: RGS), a leader in the haircare industry, whose primary business is franchising, owning and operating technology enabled hair salons, today reported second quarter 2020 net loss from continuing operations of $9.5 million, or $0.26 loss per diluted share as compared to net income from continuing operations of $0.4 million, or $0.01 income per diluted share in the second quarter of 2019. The Company’s reported results include $20.7 million of non-cash goodwill derecognition associated with the sale of 443 salons to franchisees, partially offset by $2.6 million of other discrete items. Excluding discrete items and the income from discontinued operations, the Company reported second quarter 2020 adjusted net income of $4.6 million, or $0.13 earnings per diluted share as compared to adjusted net income of $8.0 million, or $0.18 earnings per diluted share, for the same period last year. The year-over-year decrease in adjusted net income was driven primarily by the elimination of adjusted net income that had been generated in the prior year period from the 1,447 company-owned salons that were sold and converted to the Company’s asset-light franchise portfolio over the past twelve months.
Total revenue in the quarter of $208.8 million decreased $65.9 million, or 24.0%, year-over-year driven primarily by the conversion of a net 1,447 company-owned salons to the Company's asset-light franchise portfolio over the past 12 months. These reductions were partially offset by revenue growth of $39.4 million in the Company's franchise segment. The Company noted that in connection with the new leasing guidance, it now records franchise rental income and the corresponding rental expense on separate line items. The net impact is to gross up both revenue and expense with no impact to overall earnings. The impact during the second quarter was an increase in revenue and expense by $33.6 million, with no impact on operating income.
Second quarter adjusted EBITDA of $17.0 million decreased $3.6 million, versus the same period last year. Excluding the $15.0 and $9.4 million gain from the sale of company-owned salons during the current and prior year quarter, respectively, adjusted EBITDA of $2.0 million was $9.2 million unfavorable versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year from the 1,447 company-owned salons that were sold and converted to the Company’s asset-light franchise portfolio over the past 12 months.
Hugh Sawyer, Chairman, President and Chief Executive Officer, commented, "As we disclosed at the close of fiscal year 2019, the transition to a capital-light franchise model initially has a dilutive impact on the Company’s Adjusted EBITDA, as we saw this quarter. Nevertheless, we remain convinced that a fully-franchised business that generates a higher return on its capital will prove to be in the best long-term interests of our shareholders.” Mr. Sawyer continued, “The second quarter represents an important milestone in our transition where we gained additional clarity into the estimated end-state of our transformational process. We now believe that our transition to a fully-franchised business will be substantially complete by the end of this calendar year.” Mr. Sawyer concluded, “This improved visibility related to the speed of our transition enabled us to begin meaningful reductions in our annualized expenses and to initiate plans to re-engineer our capital structure in expectation of our estimated end-state and a new organic growth phase as a capital-light franchisor.”
Second Quarter Segment Results
Franchise
| Three Months Ended December 31, | Increase (Decrease) | Six Months Ended December 31, | Increase (Decrease) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) (1) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Revenue | ||||||||||||||||||
| Product | $ | 16.2 | $ | 10.6 | $ | 5.6 | $ | 28.0 | $ | 20.7 | $ | 7.3 | ||||||
| Product sold to TBG mall locations | 0.7 | 7.2 | (6.5 | ) | 2.0 | 12.7 | (10.7 | ) | ||||||||||
| Total product | $ | 16.9 | $ | 17.8 | $ | (0.9 | ) | $ | 30.0 | $ | 33.4 | $ | (3.4 | ) | ||||
| Royalties and fees | 29.3 | 22.6 | 6.7 | 57.4 | 45.0 | 12.4 | ||||||||||||
| Franchise rental income | 33.6 | — | 33.6 | 65.1 | — | 65.1 | ||||||||||||
| Total franchised salons revenue | $ | 79.8 | $ | 40.4 | $ | 39.4 | $ | 152.5 | $ | 78.4 | $ | 74.1 | ||||||
| Franchise Same-Store Sales Comps (2) | (1.4 | )% | 1.4 | % | (0.8 | )% | 1.3 | % | ||||||||||
| EBITDA, as Adjusted | $ | 13.1 | $ | 8.5 | $ | 4.6 | $ | 24.9 | $ | 18.3 | $ | 6.6 | ||||||
| as a percent of revenue | 16.4 | % | 20.9 | % | 16.4 | % | 23.4 | % | ||||||||||
| as a percent of adjusted revenue | 37.6 | % | 33.4 | % | 38.8 | % | 36.8 | % | ||||||||||
| Total Franchise Salons | 4,790 | 4,266 | 524 | |||||||||||||||
| as a percent of total Company-owned and Franchise salons | 67.8 | % | 53.8 | % |
____________________________________
| (1) | Variances calculated on amounts shown in in millions may result in rounding differences. |
|---|---|
| (2) | TBG is excluded from same-store sales in both periods. |
| --- | --- |
Second quarter Franchise revenue was $79.8 million, a $39.4 million, or 97.5% increase compared to the prior year quarter and included franchise rental income of $33.6 million due to the adoption of the new lease accounting requirements. Royalties and fees were $29.3 million, a $6.7 million, or 29.8% increase versus the same period last year. Royalties and fees increased due to increased franchise salon counts. Product sales to franchisees of $16.9 million decreased $0.9 million versus the same period last year driven primarily by lower sales to TBG, partially offset by increased franchise salon counts.
Franchise adjusted EBITDA of $13.1 million grew $4.6 million, or 54.4% year-over-year primarily driven by the increase in salon counts.
Company-Owned Salons
| Three Months Ended December 31, | (Decrease) | Six Months Ended December 31, | (Decrease) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions) (1) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Total Revenue | $ | 128.9 | $ | 234.3 | $ | (105.3 | ) | $ | 303.4 | $ | 484.1 | $ | (180.7 | ) | |||||
| Company-owned Same-Store Sales Comps | (3.6 | )% | 0.5 | % | (2.7 | )% | 0.5 | % | |||||||||||
| Year-over-Year Ticket change | 3.0 | % | 5.2 | % | 3.0 | % | 4.7 | % | |||||||||||
| Year-over-Year Transaction change | (6.6 | )% | (4.7 | )% | (5.7 | )% | (4.2 | )% | |||||||||||
| EBITDA, as Adjusted | $ | 4.2 | $ | 21.3 | $ | (17.1 | ) | $ | 15.7 | $ | 48.9 | $ | (33.2 | ) | |||||
| as a percent of revenue | 3.3 | % | 9.0 | % | 5.2 | % | 10.1 | % | |||||||||||
| Total Company-owned salons (2) | 2,277 | 3,668 | (1,391 | ) | |||||||||||||||
| as a percent of total Company-owned and Franchise salons | 32.2 | % | 46.2 | % | ____________________________________ |
| (1) | Variances calculated on amounts shown in millions may result in rounding differences. |
|---|---|
| (2) | Includes the 207 mall-based salons that were acquired from TBG on December 31, 2019. |
| --- | --- |
Second quarter revenue for the Company-owned salon segment decreased $105.3 million, or 45.0%, versus the prior year to $128.9 million. The year-over-year decline in revenue was driven by the decrease of a net 1,447 salons sold and converted to the Company's asset-light franchise portfolio over the past 12 months, the closure of a net 151 unprofitable salons over the past 12 months and by a decline in Company-owned same-store sales of 3.6%. The year-over-year decline in company-owned same store sales was driven by a 6.6% decrease in transactions, which may be partially related to the shorter number of retail days between Thanksgiving and Christmas in 2019, partially offset by a 3.0% increase in average ticket.
Second quarter adjusted EBITDA of $4.2 million decreased $17.1 million, or 80.1% versus the same period last year driven primarily by the elimination of EBITDA that had been generated in the prior year period from the 1,447 company-owned salons that were sold and converted to the Company's asset-light franchise portfolio over the past 12 months and the decline in service and product margins, partially offset by a decrease in marketing spend.
Other Key Events
| • | In January 2020, the Company announced further reductions to general and administrative expenses that are expected to save approximately $19 million on an annualized basis. |
|---|---|
| • | The Company's retention of Guggenheim Securities, LLC as its exclusive investment banker to identify sources of replacement debt financing on terms appropriate for a fully-franchised capital-light growth platform. The Company expects to complete its replacement debt financing no later than the fourth quarter of this fiscal year. |
| --- | --- |
| • | The Company's Board of Directors elected Hugh Sawyer, President and Chief Executive Officer, as Chairman of the Company's Board of Directors. Dave Williams to remain the Board's Lead Independent Director. |
| --- | --- |
| • | The Company closed on the sale of its corporate headquarters in December 2019 resulting in a $4.0 million gain in the three and six months ended December 31, 2019. |
| --- | --- |
| • | The Company sold and converted an additional 133 company-owned salons to the Alline Salon Group, who is now the Company's largest franchisee and sole Holiday Hair franchisee. |
| --- | --- |
| • | Announced the sale of 121 SmartStyle salons to the Yellowhammer Salon Group. |
| --- | --- |
| • | Closure of 51 non-performing company-owned salons in the quarter which were at or near the end of their lease term. |
| --- | --- |
| • | The Company integrated a small number of former TBG North American salons which are now being managed in the normal course. These salons represent approximately 10% of the company-owned salon portfolio. |
| --- | --- |
| • | The Company's new internally developed back office salon management system is in Beta. |
| --- | --- |
| • | The Company is preparing for the launch of its new private label haircare products under its "Blossom" brand and the relaunch of its repackaged and reformulated successful "Designline" owned brand in the Spring. |
| --- | --- |
| • | The Company entered into an agreement to sell its stake in the Empire Education Group which allows the Company to de-complicate and de-risk its business while preserving and enhancing the essential value we derive from our relationship with Empire Education. |
| --- | --- |
| • | The Company continues to make meaningful progress on its previously disclosed effort to convert to a fully-franchised model. During the quarter, it sold and transferred 443 company-owned salons to its asset-light franchise portfolio. In addition, the Company has a pipeline of approximately 900 salons to be transitioned in various stages of negotiation. The pipeline represents approximately 50% of the Company-owned salon portfolio when taking into account expected closures of approximately 350 - 500 company-owned salon locations. The Company estimates that its transition to a franchise platform will be substantially complete by calendar year-end. |
| --- | --- |
| • | The impact of the transactions closed in the quarter is as follows: | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Increase (Decrease) | Six Months Ended December 31, | Increase (Decrease) | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (Dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| Salons sold to franchisees | 443 | 133 | 310 | 988 | 257 | 731 | ||||||||||||
| Cash proceeds received | $ | 31,468 | $ | 11,628 | $ | 19,840 | $ | 69,414 | $ | 24,050 | $ | 45,364 | ||||||
| Gain on sale of venditions, excluding goodwill derecognition | $ | 14,993 | $ | 9,369 | $ | 5,624 | $ | 41,213 | $ | 16,501 | $ | 24,712 | ||||||
| Non-cash goodwill derecognition | (20,685 | ) | (6,504 | ) | 14,181 | (52,765 | ) | (17,596 | ) | 35,169 | ||||||||
| (Loss) Gain from sale of salon assets to franchisees, net | $ | (5,692 | ) | $ | 2,865 | $ | (8,557 | ) | $ | (11,552 | ) | $ | (1,095 | ) | $ | (10,457 | ) |
Adoption of New Accounting Standard
On July 1, 2019, the Company adopted amended lease guidance. The guidance was adopted on a prospective basis and results in an increase in franchise revenue and franchise rent expense. There is no impact on operating income.
Non-GAAP reconciliations:
For GAAP to non-GAAP reconciliations, please refer to attached section titled "Non-GAAP Reconciliations." A complete reconciliation of reported earnings to adjusted earnings is included in this press release and is available on the Company’s website at www.regiscorp.com.
Earnings Webcast
Regis Corporation will host a conference call via webcast discussing second quarter results tomorrow, February 4, 2020, at 9 a.m., Central time. Interested parties are invited to participate in the live webcast by logging on to www.regiscorp.com or participate via telephone by dialing (800) 367-2403 and entering access code 8274513. A replay of the presentation will be available later that day. The replay phone number is (888) 203-1112, access code 8274513.
About Regis Corporation
Regis Corporation (NYSE:RGS) is a leader in beauty salons and cosmetology education. As of December 31, 2019, the Company franchised, owned or held ownership interests in 7,152 worldwide locations. Regis’ franchised and corporate locations operate under concepts such as Supercuts^®^, SmartStyle^®^, Cost Cutters^®^, Roosters^®^ and First Choice Haircutters^®^. Regis maintains an ownership interest in Empire Education Group in the U.S. For additional information about the Company, including a reconciliation of certain non-GAAP financial information and certain supplemental financial information, please visit the Investor Information section of the corporate website at www.regiscorp.com.
CONTACT: REGIS CORPORATION: Kersten Zupfer
investorrelations@regiscorp.com
This press release contains or may contain "forward-looking statements" within the meaning of the federal securities laws, including statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this document reflect management's best judgment at the time they are made, but all such statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those expressed in or implied by the statements herein. Such forward-looking statements are often identified herein by use of words including, but not limited to, "may," "believe," "project," "forecast," "expect," "estimate," "anticipate," and "plan." In addition, the following factors could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements. These factors include the continued ability of the Company to implement its strategy, priorities and initiatives including the re-engineering of our corporate and field infrastructure; our and our franchisee's ability to attract, train and retain talented stylists; financial performance of our franchisees; acceleration of sale of salons to franchisees; if our capital investments in technology do not achieve appropriate returns; our ability to manage cyber threats and protect the security of potentially sensitive information about our guests, employees, vendors or Company information; the ability to operate or sell the salons transferred back from TBG; the outcome of the review by the administrator in TBG's insolvency proceedings in the United Kingdom; the ability of the Company to maintain a satisfactory relationship with Walmart; marketing efforts to drive traffic; changes in regulatory and statutory laws including increases in minimum wages; our ability to maintain and enhance the value of our brands; premature termination of agreements with our franchisees; reliance on information technology systems; reliance on external vendors; consumer shopping trends and changes in manufacturer distribution channels; competition within the personal hair care industry; changes in tax exposure; changes in healthcare; changes in interest rates and foreign currency exchange rates; failure to standardize operating processes across brands; financial performance of Empire Education Group; the continued ability of the Company to implement cost reduction initiatives; compliance with debt covenants and access to existing revolving credit facility; changes in economic conditions; changes in consumer tastes and fashion trends; exposure to uninsured or unidentified risks; reliance on our management team and other key personnel or other factors not listed above. Additional information concerning potential factors that could affect future financial results is set forth under Item 1A on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made in our subsequent annual and periodic reports filed or furnished with the SEC on Forms 10-K, 10-Q and 8-K and Proxy Statements on Schedule 14A.
REGIS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(Dollars in thousands, except share data)
| December 31, <br>2019 | June 30, <br>2019 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 49,783 | $ | 70,141 |
| Receivables, net | 27,756 | 30,143 | ||
| Inventories | 68,413 | 77,322 | ||
| Other current assets | 32,458 | 33,216 | ||
| Total current assets | 178,410 | 210,822 | ||
| Property and equipment, net | 68,917 | 78,090 | ||
| Goodwill | 293,019 | 345,718 | ||
| Other intangibles, net | 8,159 | 8,761 | ||
| Right of use asset | 911,948 | — | ||
| Other assets | 38,144 | 34,170 | ||
| Non-current assets held for sale | — | 5,276 | ||
| Total assets | $ | 1,498,597 | $ | 682,837 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 55,587 | $ | 47,532 |
| Accrued expenses | 59,707 | 80,751 | ||
| Short-term lease liability | 156,154 | — | ||
| Total current liabilities | 271,448 | 128,283 | ||
| Long-term debt, net | 60,000 | 90,000 | ||
| Long-term lease liability | 767,624 | — | ||
| Long-term financing liabilities | 28,485 | 28,910 | ||
| Other noncurrent liabilities | 95,979 | 111,399 | ||
| Total liabilities | 1,223,536 | 358,592 | ||
| Commitments and contingencies | ||||
| Shareholders’ equity: | ||||
| Common stock, $0.05 par value; issued and outstanding 35,563,611 and 36,869,249 common shares at December 31, 2019 and June 30, 2019 respectively | 1,778 | 1,843 | ||
| Additional paid-in capital | 21,230 | 47,152 | ||
| Accumulated other comprehensive income | 9,480 | 9,342 | ||
| Retained earnings | 242,573 | 265,908 | ||
| Total shareholders’ equity | 275,061 | 324,245 | ||
| Total liabilities and shareholders’ equity | $ | 1,498,597 | $ | 682,837 |
– more –
REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
For The Three and Six Months Ended December 31, 2019 and 2018
(Dollars and shares in thousands, except per share data amounts)
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Revenues: | ||||||||||||
| Service | $ | 101,805 | $ | 190,419 | $ | 243,746 | $ | 398,267 | ||||
| Product | 43,983 | 61,649 | 89,639 | 119,240 | ||||||||
| Royalties and fees | 29,347 | 22,603 | 57,364 | 44,999 | ||||||||
| Franchise rental income | 33,630 | — | 65,054 | — | ||||||||
| Total revenue | 208,765 | 274,671 | 455,803 | 562,506 | ||||||||
| Operating expenses: | ||||||||||||
| Cost of service | 67,358 | 114,931 | 157,840 | 236,428 | ||||||||
| Cost of product | 27,258 | 36,350 | 53,585 | 68,531 | ||||||||
| Site operating expenses | 26,330 | 35,563 | 59,272 | 72,384 | ||||||||
| General and administrative | 32,691 | 45,836 | 73,316 | 93,563 | ||||||||
| Rent | 20,495 | 34,642 | 44,759 | 70,620 | ||||||||
| Franchise rent expense | 33,630 | — | 65,054 | — | ||||||||
| Depreciation and amortization | 7,747 | 8,900 | 17,127 | 19,102 | ||||||||
| TBG mall location restructuring | 722 | — | 2,222 | — | ||||||||
| Total operating expenses | 216,231 | 276,222 | 473,175 | 560,628 | ||||||||
| Operating (loss) income | (7,466 | ) | (1,551 | ) | (17,372 | ) | 1,878 | |||||
| Other (expense) income: | ||||||||||||
| Interest expense | (1,464 | ) | (1,072 | ) | (2,903 | ) | (2,078 | ) | ||||
| (Loss) gain from sale of salon assets to franchisees, net | (5,692 | ) | 2,865 | (11,552 | ) | (1,095 | ) | |||||
| Interest income and other, net | 4,346 | 629 | 4,517 | 989 | ||||||||
| (Loss) income from continuing operations before income taxes | (10,276 | ) | 871 | (27,310 | ) | (306 | ) | |||||
| Income tax benefit (expense) | 795 | (454 | ) | 3,651 | 260 | |||||||
| (Loss) income from continuing operations | (9,481 | ) | 417 | (23,659 | ) | (46 | ) | |||||
| Income from discontinued operations, net of taxes | 79 | 6,113 | 452 | 5,849 | ||||||||
| Net (loss) income | $ | (9,402 | ) | $ | 6,530 | $ | (23,207 | ) | $ | 5,803 | ||
| Net (loss) income per share: | ||||||||||||
| Basic: | ||||||||||||
| (Loss) income from continuing operations | $ | (0.26 | ) | $ | 0.01 | $ | (0.66 | ) | $ | 0.00 | ||
| Income from discontinued operations | 0.00 | 0.14 | 0.01 | 0.13 | ||||||||
| Net (loss) income per share, basic (1) | $ | (0.26 | ) | $ | 0.15 | $ | (0.64 | ) | $ | 0.13 | ||
| Diluted: | ||||||||||||
| (Loss) income from continuing operations | $ | (0.26 | ) | $ | 0.01 | $ | (0.66 | ) | $ | 0.00 | ||
| Income from discontinued operations | 0.00 | 0.14 | 0.01 | 0.13 | ||||||||
| Net (loss) income per share, diluted (1) | $ | (0.26 | ) | $ | 0.15 | $ | (0.64 | ) | $ | 0.13 | ||
| Weighted average common and common equivalent shares outstanding: | ||||||||||||
| Basic | 35,798 | 43,619 | 36,028 | 44,175 | ||||||||
| Diluted | 35,798 | 44,479 | 36,028 | 44,175 |
_______________________________________________________________________________
| (1) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
|---|
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REGIS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
For the Six Months Ended December 31, 2019 and 2018
(Dollars in thousands)
| Six Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Cash flows from operating activities: | ||||||
| Net (loss) income | $ | (23,207 | ) | $ | 5,803 | |
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||
| Non-cash adjustments related to discontinued operations | (586 | ) | 176 | |||
| Depreciation and amortization | 14,484 | 16,799 | ||||
| Deferred income taxes | (5,227 | ) | (7,915 | ) | ||
| Gain from sale of company headquarters, net | (3,990 | ) | — | |||
| Loss from sale of salon assets to franchisees, net | 11,552 | 1,095 | ||||
| Salon asset impairments | 2,643 | 2,303 | ||||
| Stock-based compensation | 2,139 | 4,552 | ||||
| Amortization of debt discount and financing costs | 138 | 138 | ||||
| Other non-cash items affecting earnings | (243 | ) | (352 | ) | ||
| Changes in operating assets and liabilities, excluding the effects of asset sales | (17,032 | ) | (33,223 | ) | ||
| Net cash used in operating activities | (19,329 | ) | (10,624 | ) | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (17,576 | ) | (16,804 | ) | ||
| Proceeds from sale of assets to franchisees | 69,414 | 24,050 | ||||
| Costs associated with sale of salon assets to franchisees | (1,550 | ) | — | |||
| Proceeds from company-owned life insurance policies | — | 24,617 | ||||
| Proceeds from sale of company headquarters | 8,996 | — | ||||
| Net cash provided by investing activities | 59,284 | 31,863 | ||||
| Cash flows from financing activities: | ||||||
| Repayment of long-term debt | (30,000 | ) | — | |||
| Repurchase of common stock | (28,246 | ) | (65,136 | ) | ||
| Taxes paid for shares withheld | (1,809 | ) | (2,305 | ) | ||
| Net proceeds from sale and leaseback transaction | — | 18,068 | ||||
| Sale and leaseback payments | (480 | ) | — | |||
| Net cash used in financing activities | (60,535 | ) | (49,373 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | 122 | (174 | ) | |||
| Decrease in cash, cash equivalents, and restricted cash | (20,458 | ) | (28,308 | ) | ||
| Cash, cash equivalents and restricted cash: | ||||||
| Beginning of period | 92,379 | 148,774 | ||||
| End of period | $ | 71,921 | $ | 120,466 |
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REGIS CORPORATION
Same-Store Sales
SYSTEM-WIDE SAME-STORE SALES (1):
| For the Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (2.0 | )% | (9.6 | )% | (4.3 | )% | 4.1 | % | (2.1 | )% | 2.1 | % |
| Supercuts | (0.4 | ) | (11.8 | ) | (1.1 | ) | 1.0 | (4.5 | ) | 0.6 | ||
| Signature Style | (1.5 | ) | (8.0 | ) | (2.3 | ) | 0.5 | (1.7 | ) | 0.3 | ||
| Total | (1.1 | )% | (9.6 | )% | (2.3 | )% | 1.5 | % | (2.5 | )% | 0.9 | % |
| For the Six Months Ended | ||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (0.9 | )% | (8.6 | )% | (3.1 | )% | 2.7 | % | (1.2 | )% | 1.6 | % |
| Supercuts | 0.2 | (9.8 | ) | (0.4 | ) | 1.1 | (4.9 | ) | 0.7 | |||
| Signature Style | (1.3 | ) | (6.7 | ) | (2.0 | ) | 0.8 | (2.4 | ) | 0.5 | ||
| Total | (0.5 | )% | (8.3 | )% | (1.7 | )% | 1.4 | % | (2.3 | )% | 0.8 | % |
____________________________________
(1) System-wide same-store sales are calculated as the total change in sales for system-wide company-owned and franchise locations for more than one year (including TBG mall locations in 2019) that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date system-wide same-store sales are the sum of the system-wide same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. System-wide same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG salons were not a franchise location in fiscal year 2020 so by definition they are not included in system-wide same-store sales. TBG same-store sales are excluded from fiscal year 2019 same-store sales to be comparative to fiscal year 2020.
FRANCHISE SAME-STORE SALES (1):
| For the Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (5.1 | )% | (14.8 | )% | (7.6 | )% | 1.1 | % | (20.0 | )% | (5.6 | )% |
| Supercuts | 0.1 | (10.5 | ) | (0.5 | ) | 2.3 | (5.8 | ) | 1.8 | |||
| Signature Style | (0.4 | ) | (6.8 | ) | (1.4 | ) | 1.9 | (1.9 | ) | 1.3 | ||
| Total | (0.4 | )% | (10.1 | )% | (1.4 | )% | 2.2 | % | (5.7 | )% | 1.4 | % |
| For the Six Months Ended | ||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (4.3 | )% | (16.6 | )% | (7.6 | )% | 1.7 | % | (17.7 | )% | (4.3 | )% |
| Supercuts | 0.9 | (8.8 | ) | 0.3 | 1.9 | (5.3 | ) | 1.5 | ||||
| Signature Style | — | (7.3 | ) | (1.0 | ) | 2.2 | (3.7 | ) | 1.3 | |||
| Total | 0.3 | % | (10.1 | )% | (0.8 | )% | 2.0 | % | (5.7 | )% | 1.3 | % |
____________________________________
(1) Franchise same-store sales are calculated as the total change in sales for salons that have been a franchise location for more than one year that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date franchise same-store sales are the sum of the franchise same-store sales computed on a daily basis. Franchise salons that do not report daily sales are excluded from same-store sales. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. Franchise same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation. TBG salons were not a franchise location in fiscal year 2020 so by definition they are not included in system-wide same-store sales. TBG same-store sales are excluded from fiscal year 2019 same-store sales to be comparative to fiscal year 2020.
COMPANY-OWNED SAME-STORE SALES (2):
| For the Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (1.2 | )% | (8.6 | )% | (3.5 | )% | 4.3 | % | (1.0 | )% | 2.6 | % |
| Supercuts | (3.9 | ) | (17.7 | ) | (5.1 | ) | (1.4 | ) | (2.9 | ) | (1.5 | ) |
| Signature Style | (2.5 | ) | (9.4 | ) | (3.3 | ) | (0.1 | ) | (1.6 | ) | (0.3 | ) |
| Total | (2.1 | )% | (9.3 | )% | (3.6 | )% | 1.0 | % | (1.4 | )% | 0.5 | % |
| For the Six Months Ended | ||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||
| Service | Retail | Total | Service | Retail | Total | |||||||
| SmartStyle | (0.1 | )% | (7.1 | )% | (2.2 | )% | 2.8 | % | (0.4 | )% | 1.8 | % |
| Supercuts | (3.6 | ) | (13.4 | ) | (4.4 | ) | (0.3 | ) | (4.4 | ) | (0.6 | ) |
| Signature Style | (2.4 | ) | (6.0 | ) | (2.8 | ) | 0.1 | (1.4 | ) | — | ||
| Total | (1.6 | )% | (7.2 | )% | (2.7 | )% | 0.9 | % | (1.1 | )% | 0.5 | % |
____________________________________
(2) Company-owned same-store sales are calculated as the total change in sales for company-owned locations that were open on a specific day of the week during the current period and the corresponding prior period. Quarterly and year-to-date company-owned same-store sales are the sum of the company-owned same-store sales computed on a daily basis. Locations relocated within a one-mile radius are included in same-store sales as they are considered to have been open in the prior period. Company-owned same-store sales are calculated in local currencies to remove foreign currency fluctuations from the calculation.
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REGIS CORPORATION
System-Wide Location Counts
| December 31, 2019 | June 30, 2019 | |||
|---|---|---|---|---|
| FRANCHISE SALONS: | ||||
| SmartStyle/Cost Cutters in Walmart Stores | 969 | 615 | ||
| Supercuts | 2,493 | 2,340 | ||
| Signature Style | 1,156 | 766 | ||
| Total North American Franchise salons | 4,618 | 3,721 | ||
| Total International Salons (1) | 172 | 230 | ||
| Total Franchise Salons | 4,790 | 3,951 | ||
| as a percent of total Company-owned and Franchise salons | 67.8 | % | 56.0 | % |
| COMPANY-OWNED SALONS: | ||||
| SmartStyle/Cost Cutters in Walmart Stores | 1,159 | 1,550 | ||
| Supercuts | 262 | 403 | ||
| Signature Style | 649 | 1,155 | ||
| Mall-based salons (2) | 207 | — | ||
| Total Company-owned salons | 2,277 | 3,108 | ||
| as a percent of total Company-owned and Franchise salons | 32.2 | % | 44.0 | % |
| OWNERSHIP INTEREST LOCATIONS: | ||||
| Equity ownership interest locations | 85 | 86 | ||
| Grand Total, System-wide | 7,152 | 7,145 |
____________________________________
| (1) | Canadian and Puerto Rican salons are included in the North American salon totals. |
|---|---|
| (2) | The mall-based salons were acquired on December 31, 2019 resulting in no impact to the Statement of Operations for the three and six months ended December 31, 2019. |
| --- | --- |
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Non-GAAP Reconciliations
We believe our presentation of non-GAAP operating (loss) income, net income, net income per diluted share, and other non-GAAP financial measures provides meaningful insight into our ongoing operating performance and an alternative perspective of our results of operations. Presentation of the non-GAAP measures allows investors to review our core ongoing operating performance from the same perspective as management and the Board of Directors. These non-GAAP financial measures provide investors an enhanced understanding of our operations, facilitate investors’ analyses and comparisons of our current and past results of operations and provide insight into the prospects of our future performance. We also believe the non-GAAP measures are useful to investors because they provide supplemental information research analysts frequently use to analyze financial performance.
The method we use to produce non-GAAP results is not in accordance with U.S. GAAP and may differ from methods used by other companies. These non-GAAP results should not be regarded as a substitute for corresponding U.S. GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures should be viewed in conjunction with our financial statements prepared in accordance with U.S. GAAP.
Non-GAAP reconciling items for the three and six ended months ended December 31, 2019 and 2018:
The following information is provided to give qualitative and quantitative information related to items impacting comparability. Items impacting comparability are not defined terms within U.S. GAAP. Therefore, our non-GAAP financial information may not be comparable to similarly titled measures reported by other companies. We determine which items to consider as “items impacting comparability” based on how management views our business, makes financial, operating and planning decisions and evaluates the Company’s ongoing performance. The following items have been excluded from our non-GAAP results:
| • | Professional fees. |
|---|---|
| • | Severance expense. |
| --- | --- |
| • | Legal fees. |
| --- | --- |
| • | TBG restructuring. |
| --- | --- |
| • | Goodwill derecognition. |
| --- | --- |
| • | TBG discontinued operations. |
| --- | --- |
| • | Employee litigation reserve. |
| --- | --- |
| • | Corporate office transition. |
| --- | --- |
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REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except per share data)
(Unaudited)
| Reconciliation of U.S. GAAP operating (loss) income and U.S. GAAP net (loss) income to equivalent non-GAAP measures | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||
| U.S. GAAP financial line item | 2019 | 2018 | 2019 | 2018 | |||||||||
| U.S. GAAP revenue | $ | 208,765 | $ | 274,671 | $ | 455,803 | $ | 562,506 | |||||
| U.S. GAAP operating (loss) income | $ | (7,466 | ) | $ | (1,551 | ) | $ | (17,372 | ) | $ | 1,878 | ||
| Non-GAAP operating expense adjustments (1) | |||||||||||||
| Professional fees | General and administrative | 115 | 2,759 | 115 | 4,050 | ||||||||
| Severance | General and administrative | 497 | 70 | 2,917 | 2,790 | ||||||||
| Legal fees | General and administrative | — | 439 | — | 439 | ||||||||
| Corporate office transition | Rent | 404 | — | 404 | — | ||||||||
| Employee litigation reserve | Site operating expenses | (600 | ) | — | (600 | ) | — | ||||||
| TBG restructuring | TBG restructuring | 968 | — | 2,468 | — | ||||||||
| Total non-GAAP operating expense adjustments | 1,384 | 3,268 | 5,304 | 7,279 | |||||||||
| Non-GAAP operating (loss) income (1) | $ | (6,082 | ) | $ | 1,717 | $ | (12,068 | ) | $ | 9,157 | |||
| U.S. GAAP net (loss) income | $ | (9,402 | ) | $ | 6,530 | $ | (23,207 | ) | $ | 5,803 | |||
| Non-GAAP net income adjustments: | |||||||||||||
| Non-GAAP revenue adjustments | — | — | — | — | |||||||||
| Non-GAAP operating expense adjustments | 1,384 | 3,268 | 5,304 | 7,279 | |||||||||
| Corporate office transition | Interest income and other, net | (3,990 | ) | — | (3,990 | ) | — | ||||||
| Goodwill derecognition | Interest income and other, net | 20,685 | 6,504 | 52,765 | 17,596 | ||||||||
| Income tax impact on Non-GAAP adjustments (2) | Income taxes | (3,976 | ) | (2,150 | ) | (11,898 | ) | (5,473 | ) | ||||
| TBG discontinued operations, net of income tax | Loss from discontinued operations, net of tax | (79 | ) | (6,113 | ) | (452 | ) | (5,849 | ) | ||||
| Total non-GAAP net income adjustments | 14,024 | 1,509 | 41,729 | 13,553 | |||||||||
| Non-GAAP net income | $ | 4,622 | $ | 8,039 | $ | 18,522 | $ | 19,356 |
____________________________________
Notes:
| (1) | Adjusted operating margins for the three months ended December 31, 2019 and 2018, were 2.9% and 0.6%, and were 2.6% and 1.6% for the six months ended December 31, 2019 and 2018, respectively, and are calculated as non-GAAP operating income divided by U.S. GAAP revenue for each respective period. |
|---|---|
| (2) | Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 22% for the three and six months ended December 31, 2019 and 2018, for all non-GAAP operating expense adjustments. |
| --- | --- |
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REGIS CORPORATION
Reconciliation of selected U.S. GAAP to non-GAAP financial measures
(Dollars in thousands, except per share data)
(Unaudited)
| Reconciliation of U.S. GAAP net (loss) income per diluted share to non-GAAP net income per diluted share | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| U.S. GAAP net (loss) income per diluted share | $ | (0.263 | ) | $ | 0.147 | $ | (0.644 | ) | $ | 0.131 | ||
| Severance (1) | 0.010 | 0.001 | 0.061 | 0.048 | ||||||||
| Professional fees (1) | 0.002 | 0.048 | 0.002 | 0.070 | ||||||||
| Legal fees | — | 0.008 | — | 0.008 | ||||||||
| Employee litigation reserve | (0.013 | ) | — | (0.013 | ) | — | ||||||
| Corporate office transition | (0.074 | ) | — | (0.075 | ) | — | ||||||
| TBG restructuring | 0.020 | — | 0.052 | — | ||||||||
| Goodwill derecognition (1) | 0.435 | 0.114 | 1.101 | 0.304 | ||||||||
| TBG discontinued operations, net of tax | (0.002 | ) | (0.137 | ) | (0.012 | ) | (0.130 | ) | ||||
| Impact of change in weighted average shares (3) | 0.009 | — | 0.023 | (0.003 | ) | |||||||
| Non-GAAP net income per diluted share (2) | $ | 0.125 | $ | 0.181 | $ | 0.496 | $ | 0.429 | ||||
| U.S. GAAP Weighted average shares - basic | 35,798 | 43,619 | 36,028 | 44,175 | ||||||||
| U.S. GAAP Weighted average shares - diluted | 35,798 | 44,479 | 36,028 | 44,175 | ||||||||
| Non-GAAP Weighted average shares - diluted (3) | 37,120 | 44,479 | 37,366 | 45,078 |
____________________________________
Notes:
| (1) | Based on projected statutory effective tax rate analyses, the non-GAAP tax provision was calculated to be approximately 22% for the three and six months ended December 31, 2019 and 2018, for all non-GAAP operating expense adjustments. |
|---|---|
| (2) | Total is a recalculation; line items calculated individually may not sum to total due to rounding. |
| --- | --- |
| (3) | Non-GAAP net income per share reflects the weighted average shares associated with non-GAAP net income, which includes the dilutive effect of common stock equivalents. The earnings per share impact of the adjustments for the three and six months ended December 31, 2019 included additional shares for common stock equivalents of 1.3 million. The impact of the adjustments described above result in the effect of the common stock equivalents to be dilutive to the non-GAAP net income per share. |
| --- | --- |
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REGIS CORPORATION
Reconciliation of reported U.S. GAAP net income (loss) to adjusted EBITDA, a non-GAAP financial measure
(Dollars in thousands)
(Unaudited)
Adjusted EBITDA
EBITDA represents U.S. GAAP net (loss) income for the respective period excluding interest expense, income taxes and depreciation and amortization expense. The Company defines adjusted EBITDA, as EBITDA excluding identified items impacting comparability for each respective period. For the three and six months ended December 31, 2019, the items impacting comparability consisted of the items identified in the non-GAAP reconciling items for the respective periods. The impacts of the income tax provision adjustments associated with the above items are already included in the U.S. GAAP reported net (loss) income to EBITDA reconciliation, therefore there is no adjustment needed for the reconciliation from EBITDA to adjusted EBITDA.
| Three Months Ended December 31, 2019 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Franchise | Company-owned | Corporate | Consolidated (1) | ||||||||||||||||||||
| Consolidated reported net (loss) income, as reported (U.S. GAAP) | $ | 12,126 | $ | (1,105 | ) | $ | (20,423 | ) | $ | (9,402 | ) | ||||||||||||
| Interest expense, as reported | — | — | 1,464 | 1,464 | |||||||||||||||||||
| Income taxes, as reported | — | — | (795 | ) | (795 | ) | |||||||||||||||||
| Depreciation and amortization, as reported | 210 | 5,938 | 1,599 | 7,747 | |||||||||||||||||||
| EBITDA (as defined above) | $ | 12,336 | $ | 4,833 | $ | (18,155 | ) | $ | (986 | ) | |||||||||||||
| Professional fees | — | — | 115 | 115 | |||||||||||||||||||
| Severance | — | — | 497 | 497 | |||||||||||||||||||
| Employee litigation reserve | — | (600 | ) | — | (600 | ) | |||||||||||||||||
| TBG restructuring | 722 | — | 246 | 968 | |||||||||||||||||||
| Corporate office transition | — | — | (3,586 | ) | (3,586 | ) | |||||||||||||||||
| Goodwill derecognition | — | — | 20,685 | 20,685 | |||||||||||||||||||
| TBG discontinued operations, net of tax | — | — | (79 | ) | (79 | ) | |||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 13,058 | $ | 4,233 | $ | (277 | ) | $ | 17,014 | Three Months Ended December 31, 2018 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||
| Franchise | Company-owned | Corporate | Consolidated (1) | ||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 8,240 | $ | 14,538 | $ | (16,248 | ) | $ | 6,530 | ||||||||||||||
| Interest expense, as reported | — | — | 1,072 | 1,072 | |||||||||||||||||||
| Income taxes, as reported | — | — | 454 | 454 | |||||||||||||||||||
| Depreciation and amortization, as reported | 215 | 6,728 | 1,957 | 8,900 | |||||||||||||||||||
| EBITDA (as defined above) | $ | 8,455 | $ | 21,266 | $ | (12,765 | ) | $ | 16,956 | ||||||||||||||
| Professional fees | — | — | 2,759 | 2,759 | |||||||||||||||||||
| Legal fees | — | — | 439 | 439 | |||||||||||||||||||
| Severance | — | — | 70 | 70 | |||||||||||||||||||
| Goodwill derecognition | — | — | 6,504 | 6,504 | |||||||||||||||||||
| TBG discontinued operations, net of income tax | — | — | (6,113 | ) | (6,113 | ) | |||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 8,455 | $ | 21,266 | $ | (9,106 | ) | $ | 20,615 |
____________________________________
Notes:
| (1) | Consolidated EBITDA margins for the three months ended December 31, 2019 and 2018, were (0.5)% and 6.2%, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margins for the three months ended December 31, 2019 and 2018 were 8.1% and 7.5%, respectively, and are calculated as adjusted EBITDA divided by U.S. GAAP revenue for each respective period. |
|---|
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| For the Six Months Ended December 31, 2019 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Franchise | Company-owned | Corporate | Consolidated (1) | ||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 22,335 | $ | 4,296 | $ | (49,838 | ) | $ | (23,207 | ) | |||||||||||||
| Interest expense, as reported | — | — | 2,903 | 2,903 | |||||||||||||||||||
| Income taxes, as reported | — | — | (3,651 | ) | (3,651 | ) | |||||||||||||||||
| Depreciation and amortization, as reported | 370 | 12,045 | 4,712 | 17,127 | |||||||||||||||||||
| EBITDA (as defined above) | $ | 22,705 | $ | 16,341 | $ | (45,874 | ) | $ | (6,828 | ) | |||||||||||||
| Professional fees | — | — | 115 | 115 | |||||||||||||||||||
| Severance | — | — | 2,917 | 2,917 | |||||||||||||||||||
| Employee litigation reserve | — | (600 | ) | — | (600 | ) | |||||||||||||||||
| TBG restructuring | 2,222 | — | 246 | 2,468 | |||||||||||||||||||
| Corporate office transition | — | — | (3,586 | ) | (3,586 | ) | |||||||||||||||||
| Goodwill derecognition | — | — | 52,765 | 52,765 | |||||||||||||||||||
| TBG discontinued operations | — | — | (452 | ) | (452 | ) | |||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 24,927 | $ | 15,741 | $ | 6,131 | $ | 46,799 | For the Six Months Ended December 31, 2018 | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||||||||
| Franchise | Company-owned | Corporate | Consolidated (1) | ||||||||||||||||||||
| Consolidated reported net income (loss), as reported (U.S. GAAP) | $ | 17,960 | $ | 34,114 | $ | (46,271 | ) | $ | 5,803 | ||||||||||||||
| Interest expense, as reported | — | — | 2,078 | 2,078 | |||||||||||||||||||
| Income taxes, as reported | — | — | (260 | ) | (260 | ) | |||||||||||||||||
| Depreciation and amortization, as reported | 373 | 14,785 | 3,944 | 19,102 | |||||||||||||||||||
| EBITDA (as defined above) | $ | 18,333 | $ | 48,899 | $ | (40,509 | ) | $ | 26,723 | ||||||||||||||
| Professional fees | — | — | 4,050 | 4,050 | |||||||||||||||||||
| Severance | — | — | 2,790 | 2,790 | |||||||||||||||||||
| Legal fees | — | — | 439 | 439 | |||||||||||||||||||
| Goodwill derecognition | — | — | 17,596 | 17,596 | |||||||||||||||||||
| TBG discontinued operations | — | — | (5,849 | ) | (5,849 | ) | |||||||||||||||||
| Adjusted EBITDA, non-GAAP financial measure | $ | 18,333 | $ | 48,899 | $ | (21,483 | ) | $ | 45,749 |
____________________________________
Notes:
(1) Consolidated EBITDA margins for the six months ended December 31, 2019 and 2018 were (1.5)% and 4.8%, respectively, and are calculated as EBITDA (as defined above) divided by U.S. GAAP revenue for each respective period. Consolidated adjusted EBITDA margins for the six months ended December 31, 2019 and 2018, were 10.3% and 8.1%, respectively, and are calculated as adjusted EBITDA divided by adjusted U.S. GAAP revenue for each respective period.
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REGIS CORPORATION
Reconciliation of reported Franchise EBITDA as a percent of U.S. GAAP revenue
to EBITDA as a percent of adjusted revenue
(Dollars in thousands)
(Unaudited)
| Three Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| As Adjusted EBITDA | $ | 13,058 | $ | 8,455 | ||
| U.S. GAAP revenue | 79,841 | 40,421 | ||||
| As Adjusted EBITDA as a % of U.S. GAAP revenue | 16.4 | % | 20.9 | % | ||
| Non-margin revenue adjustments: | ||||||
| Franchise rental income | (33,630 | ) | — | |||
| Ad Fund revenue | (10,703 | ) | (7,867 | ) | ||
| TBG product sales | (744 | ) | (7,217 | ) | ||
| Adjusted revenue | $ | 34,764 | $ | 25,337 | ||
| As Adjusted EBITDA as a percent of adjusted revenue | 37.6 | % | 33.4 | % | ||
| Six Months Ended December 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||
| As Adjusted EBITDA | $ | 24,927 | $ | 18,333 | ||
| U.S. GAAP revenue | 152,387 | 78,446 | ||||
| As Adjusted EBITDA as a % of U.S. GAAP revenue | 16.4 | % | 23.4 | % | ||
| Non-margin revenue adjustments: | ||||||
| Franchise rental income | (65,054 | ) | — | |||
| Ad Fund revenue | (21,128 | ) | (15,843 | ) | ||
| TBG product sales | (2,010 | ) | (12,729 | ) | ||
| Adjusted revenue | $ | 64,195 | $ | 49,874 | ||
| As Adjusted EBITDA as a percent of adjusted revenue | 38.8 | % | 36.8 | % |
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